A logjam of diamonds held by traders, cutters and polishers will clear by the middle of next year as rough prices decline, according to the third-biggest producer of the stones.
“There is a need for the rough prices to adjust to the economic value of the polished price and that trend is in motion at the moment,” Jean-Marc Lieberherr, managing director of Rio Tinto Group’s diamond unit, said in an interview with Bloomberg Television in London Wednesday. There’s a disconnect between prices for rough diamonds and polished ones, he said.
Rough-diamond prices have fallen about 18 percent this year and are heading for a sixth straight quarterly decline, the longest streak since at least 2004, according to data from from U.K.-based WWW International Diamond Consultants. Cooling demand for diamond jewelry in China, the biggest buyer after the U.S., and a credit crunch in the industry has sapped demand for the gems.
That’s led to a buildup of diamonds held by cutters and traders, and forced the biggest producers to cut output. De Beers, the largest, has already reduced its 2015 production target three times this year to try and support prices, while Rio Tinto has lowered its goal by 10 percent.
“The polished pipeline is a little bit overloaded and it will probably take until about the middle of next year to come back to normal levels,” Lieberherr said. “The last 12 to 18 months have been tough for the industry.”
Rio Tinto operates the Argyle diamond mine in Australia and the Diavik mine in Canada in a joint venture with Dominion Diamond Corp.